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  • New Jersey AG sues used-car dealerships for predatory selling practices

    State Issues

    On March 5, the New Jersey Attorney General's Office and Division of Consumer Affairs filed a lawsuit against two auto dealerships and their owner for allegedly targeting financially vulnerable consumers through the use of predatory sales and loan practices. According to a March 7 press release issued by the New Jersey AG, the defendants allegedly targeted consumers who were unable to qualify for credit at more traditional auto dealerships by offering in-house loans on used vehicles with inflated prices, high interest rates, and terms that presented a high risk of default. When the consumers were unable to make the required payments, the defendants allegedly reclaimed the vehicles and restarted the “sell, finance, and repossess” churning cycle. The AG claims that the defendants’ practices violated the New Jersey Consumer Fraud Act, the Used Car Lemon Law, and the state’s motor vehicle advertising regulations. The complaint asks the court to permanently shut down the defendants’ operations and permanently enjoin the owner from owning, managing, and/or operating any business that advertises and/or sells motor vehicles in the state. The complaint also seeks restitution, civil penalties, and attorneys’ fees.

    State Issues State Attorney General Consumer Finance Auto Finance Fraud

  • Colorado provides certain digital tokens licensing exemptions

    State Issues

    On March 6, the Colorado Governor signed SB 19-23, which provides limited exemptions from the state’s securities registration and licensing requirements for persons dealing in certain types of digital tokens. The “Colorado Digital Token Act” (the Act) provides issuer exemptions for digital tokens sold for a “consumptive purpose”—the token is used in exchange for a good, service, or content—rather than a “speculative or investment purpose.” Specifically, the Act attempts to reduce regulatory uncertainty by providing a safe harbor from state securities laws for persons that meet the specified conditions. Subject to the filing of a referendum petition, the Act will take effect August 2.

    State Issues Digital Assets State Legislation Virtual Currency Licensing Securities Cryptocurrency

  • Illinois AG sues tax preparers for charging illegal fees

    State Issues

    On March 5, the Illinois Attorney General announced a lawsuit against a Georgia-based tax preparation business and its Chicago operators alleging the defendants collected more than $1 million in undisclosed fees from consumers from their anticipated income tax refunds for unnecessary tax-related financial products. According to the press release, the Illinois AG alleges that the defendants advertised services to consumers promising, for a $350 fee, tax refunds double their normal size and free cash advances on anticipated refunds. However, the AG alleges the defendants instead extract high, undisclosed, and unauthorized fees from consumers’ refunds without their knowledge. The complaint asks the court to grant a temporary restraining order to shut down the defendants’ operations.

    State Issues State Attorney General Consumer Finance Fees

  • Wyoming law classifies digital assets as personal property

    State Issues

    On February 26, the Wyoming Governor signed SF 125, which classifies digital assets, including virtual currency, as personal property. Specifically, the bill divides digital assets into three categories of intangible personal property within the existing Wyoming Uniform Commercial Code: (i) digital consumer assets are considered “general intangibles”; (ii) digital securities are considered “intangible personal property” and classified as securities and investment property; and (iii) virtual currency is classified as money. Among other things, SF 125 also establishes an opt-in framework for banks to provide custodial services for digital assets as custodians (and authorizes supervision fees for banks that provide such services), and clarifies the jurisdiction of Wyoming courts to hear claims related to digital assets.

     

    State Issues State Legislation Virtual Currency Securities Fintech

  • Arkansas modifies Fair Mortgage Lending Act

    State Issues

    On February 26, the Arkansas Governor signed SB 188, which amends certain provisions of the state’s Fair Mortgage Lending Act (the Act) to comply with recent developments in federal law. Among other things, the amendments, which take effect 90 days after adjournment, include (i) modifying the Act’s definition of an “applicant” and “licensee” to now include transitional loan officers; (ii) specifying that an “exempt person” must comply with outlined compensation limits, mortgage banker affiliation disclosures, and loan term negotiation restrictions; (iii) defining a “transitional loan officer” to mean “an individual who, in exchange for compensation as an employee of, or who otherwise receives compensation or remuneration from, a mortgage broker or mortgage banker, is authorized to act as a loan officer subject to a transitional loan officer license,” with term limits of no more greater than 120 days and is not subject to commissioner reapplication, renewal, or extension requirements; and (iv) outlining transitional loan officer termination conditions and employment restrictions. The amendments also address audited financial statement requirements for mortgage bankers and servicers, and state that transitional loan officers may now be subject to criminal background investigations should the state join a multistate automated licensing system.

    State Issues State Legislation Mortgages Licensing

  • California AG seeks to strengthen the California Consumer Privacy Act

    State Issues

    On February 25, the California Attorney General announced a legislative proposal that would amend several aspects of the California Consumer Privacy Act (CCPA). The CCPA was originally enacted in June 2018 (covered by a Buckley Special Alert) and subsequently amended in September 2018 (covered by InfoBytes here). The CCPA, which carries an effective date of January 1, 2020, on most provisions, sets forth various requirements for businesses that collect, transfer, or sell a consumer’s personal information. Under SB 561, which was introduced on February 22, the law would be amended to (i) expand the right of California citizens to bring private legal actions, removing aspects of the law that provided exclusivity to the AG; (ii) remove provisions that would allow companies to request guidance from the California AG on how to comply with the law, instead allowing the AG to publish general guidance; and (iii) would allow enforcement actions to be brought immediately, removing the 30-day cure window.

    State Issues Privacy/Cyber Risk & Data Security State Legislation State Attorney General CCPA

  • CSBS seeks public comment on model state payments law

    State Issues

    On February 21, the Conference of State Bank Supervisors (CSBS) issued a request for information (RFI) on issues related to state money transmission and payments regulation as state regulators begin coordinating model legislation for all 50 states to adopt in whole or in part. CSBS’ RFI is based upon recommendations made by the Fintech Industry Advisory Panel (a part of CSBS’ Vision 2020 previously covered by InfoBytes here) and seeks feedback on several areas of law and regulation to help states create harmonized definitions and interpretations on a national level. According to the Advisory Panel, “despite the general similarity of state money transmission laws, each state defines and interprets money transmission and its exemptions differently.” The RFI solicits comments framed towards outlined policy standards and risks on the following issues:

    (i) The scope of covered money transmission activities and applicable exemptions; (ii) the change in control process, including the personal vetting requirements for individuals deemed new control persons; (iii) prudential regulations—in particular, permissible investment, net worth, and surety bond requirements; (iv) supervision processes; and (v) coordination—in particular, how states can ensure the areas outlined above are implemented consistently without state-by-state policy diversion or needless duplication of effort.

    Comments on the RFI are due April 20 and will be made publicly available here.

    State Issues CSBS State Regulators Money Service / Money Transmitters RFI Fintech

  • Arkansas amends Uniform Money Services Act

    State Issues

    On February 13, the Arkansas Governor approved SB 187, which amends the state’s Uniform Money Services Act as it relates to money transmission licensees and currency exchanges. Among other things, the amendments (i) revise surety bond and net worth amounts money transmission licensees are required to maintain; (ii) specify application and renewal requirements and deadlines; (iii) permit the use of international financial reporting standards (in addition to generally accepted accounting principles) to compute the value of permissible investments licensees are required to maintain; and (iv) repeal certain savings and transitional provisions. The amendments take effect 90 days after adjournment.

    State Issues State Legislation Licensing Money Service / Money Transmitters

  • Democratic AGs object to CFPB sandbox

    State Issues

    On February 11, a coalition of 22 Democratic state Attorneys General responded to the CFPB’s proposed policy on No-Action Letters (NAL) and a new federal product sandbox, pushing back on the Bureau’s efforts to provide relief to financial institutions looking to implement new consumer financial products or services. (InfoBytes coverage on the proposal available here.) The Attorneys General argued that the Bureau “has no authority to issue such sweeping immunity absent formal rulemaking” and urged the Bureau to rescind the proposals, which the Bureau had stated were exempt from the notice and comment procedures of the Administrative Procedures Act.

    In addition to challenging the Bureau’s authority to establish these policies, the Attorneys General asserted specific concerns with the NAL proposal, including (i) the fact that the proposed NAL policy would make NALs binding on the CFPB indefinitely; (ii) the streamlined application process and 60-day decision window, potentially causing the Bureau to render hasty, uninformed decisions; and (iii) the proposed NAL policy’s purported deviations from the policies of other federal agencies, such as the SEC.

    As for the new product sandbox, the Attorneys General viewed the proposed policy as “even more troubling” than the NAL proposal, as it provides immunity from “enforcement actions by any Federal or State authorities, as well as from lawsuits brought by private parties.” The Attorneys General rejected the Bureau’s contention that the statutory safe harbors in TILA, ECOA, and the EFTA grant the authority to provide the broad enforcement relief and accused the Bureau of “abandoning its critical role in monitoring the risk that new and emergency technologies post to consumers in the financial marketplace.”

    State Issues State Attorney General Fintech CFPB Regulatory Sandbox Safe Harbor

  • State AGs urge FTC to update identity theft rules

    State Issues

    On February 11, a bipartisan group of 29 state Attorneys General, the District of Columbia Attorney General, and an official from the Hawaii Office of Consumer Protection, responded to the FTC’s request for comment on whether the agency should make changes to its identity theft detection rules (the Red Flags Rule and the Card Issuers Rule), which require financial institutions and creditors to take certain actions to detect signs of identity theft affecting their customers. (Covered by InfoBytes here.) 

    In their response, the Attorneys General urge the FTC not to repeal the Rules, arguing that it “would place consumers at greater risk of identity theft, especially consumers in states that have not enacted” laws that complement the Rules. Instead, the response letter requests the FTC modify the Rules to “ensure their continued relevance” and “keep pace with the ingenuity of identity thieves.” The suggestions include: (i) that notices of changes to email addresses and cell phone numbers be sent to both the prior and updated addresses and phone numbers, an expansion of the current use of mailing addresses; (ii) the encouragement of more current forms of authentication, including multi-factor authentication, to replace examples which imply that knowledge-based authentication by itself is sufficient; and (iii) the addition of new suspicious activity examples related to the use of an account, such as a covered account accessed by unknown devices or IP addresses, an unauthorized user unsuccessfully trying to guess account passwords through multiple attempts, and attempts by foreign IP addresses to access multiple accounts in a close period of time.

    State Issues FTC Identity Theft RFI State Attorney General Privacy/Cyber Risk & Data Security

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